Curriculum vitae

1989: Joins Alcoa at the Port Henry smelter in Geelong. Spends 17 years with the miner and refiner, finishing in Beijing as vice-president Asia-Pacific

2006: Group financial controller, Woodside

2009: Head of treasury and tax, Woodside

2010: Deputy CFO, Woodside

January 2011: CFO, Woodside

Story by Shaun Drummond

The first liquefied natural gas shipments from Woodside’s Pluto and Xena gasfields in the Carnarvon Basin in Western Australia were dispatched to electricity generators in Japan last month. It is the first new source of LNG from Australia in six years, and it has the capacity to supply 4.3 million tonnes a year of LNG and light crude oil for the next 15 years.

“We have just gone through this step change, with Pluto coming online,” says Woodside chief financial officer Lawrie Tremaine. “It would be about as a big a change as any company could go through.”

Tremaine’s career at Woodside has closely followed the Pluto development. He started as group financial controller in 2006, a year before the project was contracted at the height of the pre-GFC boom in July 2007, then headed treasury and tax in the middle of the funding crisis before being appointed CFO at the end of 2010.

At 48, Tremaine has worked in business for 31 years, going straight from high school at 17 to work in accounting jobs in small businesses in his home town of Melbourne. He liked being in the thick of running a business, but there was also “something about the orderliness of accounting that seemed to suit my mind”, he says. It explains a laconic style that masks a thorough approach, and he thinks it gave him a head start for a CFO role.

One of the more experienced oil and gas sector analysts, UBS’s Gordon Ramsay, says the CFO job in a company such as Woodside is heavily focused on funding and cost control, including the cost of capital. Despite a year’s delay and big cost blowouts on Pluto, Tremaine has achieved much, Ramsay says. He credits him as being a key driver in helping to raise massive amounts of funding during the GFC while still maintaining a good credit rating. “He has a bit of a juggling act between project timing and funding,” Ramsay says. Several projects have to be on the go at any one time. Depending on market conditions, cash flows from one project either fund further exploration or investment in new projects and allow lower-cost debt to be used, or are reallocated to shareholders if the returns aren’t there from new investments.

Getting Pluto to this point has not been easy and compromises have had to be made with the timing of funding just to be sure it was available. A company with a $30 billion market cap undertook what was initially a $12 billion spending program to tap the resource and build train one (the facility for purifying and liquefying natural gas). Plenty were sceptical they could fund the project, with almost daily calls at the height of the GFC arguing they needed to raise equity, whatever the cost. For many reasons, completion was delayed a year and costs went over budget by 26 per cent to $14.9 billion.

Tremaine does not excuse the delays and cost overruns. He says the company overpromised and under-delivered. “We made some very public and aggressive targets for Pluto and it was difficult to live up to those targets, and I was disappointed that we weren’t able to.”

Tremaine was identified as a potential successor to his predecessor Mark Chatterji and “rotated” from group financial controller into head of treasury and tax during the GFC, in April 2009. He reckons he had five years of treasury experience squashed into about nine months. “The biggest task for my finance team has been funding Pluto and holding the line,” he says, meaning not caving to the pressure. “We did an Asian syndicated loan in that second quarter of 2009 of about $1.1 billion, a bond issue of $700 million in late 2009 and in December we kicked in a $2.5 billion equity issue,” he recalls. They only managed a three-year term with the syndicated loan, however, and replaced it in 2010 with a five-year loan when the debt markets improved. When they did raise equity, it was at $42.10 a share rather than at $35, where the stock plunged to from around $63 before the GFC.

The post-GFC world has allowed the company to run more competitive tendering for the next projects and negotiate less risk. “We contracted for Pluto at a time when the global economy couldn’t have been any more buoyant, in July 2007,” Tremaine says. “We couldn’t get a contractor to take on some of the cost and schedule risks [so] we went into Pluto with a style of contract which was appropriate for the circumstances.”

Woodside is just now analysing dual bids for onshore and offshore engineering for the far bigger Browse resource located off WA’s Kimberley coast.

In April, the company said it would sell 14.7 per cent of its equity stake in Browse, reducing its holding to 31.3 per cent, to Japan Australia LNG (MIMI) for $2 billion. “That was an opportunity to monetise some of that [investment] and de-risk the value,” says Tremaine. “We are managing our risk to that one individual project – right now we are enjoying quite strong oil prices [and we] assessed it was worth testing the market.” By contrast, Woodside owns 90 per cent of Pluto.

As for any natural resource, the ultimate go-ahead on the extraction of the much bigger reserves in Browse depends on long-term forecasts of demand and supply and the prices Woodside can command versus the costs of extraction.

Australia is one of the highest-cost resources exporters and global supply is ramping up here and overseas, so keeping a lid on cost will become ever more important. After decades of refinement of extraction techniques, hard-to-tap shale gas is flooding onto the US market, and prices have plummeted there compared with what Woodside’s customers are paying in Asia.